Reebok International Ltd. reported that net income for the first quarter ended March 31 increased 5.1% to $43.2 million, or 70 cents per diluted share, compared to net income of $41.1 million, or 63 cents per diluted share, for the first quarter of 2004.

Net sales for the quarter increased 11.2% to $925 million from net sales of $832 million in the year-ago quarter. The acquisition of The Hockey Company, effective on June 30, 2004, favorably impacted sales comparisons as did foreign currency exchange rate fluctuations.

The Hockey Company sales, which were $24 million in the first quarter of 2005, are included in the reported sales of the Reebok Brand. The Company noted that during the first quarter 2005, the inclusion of The Hockey Company was dilutive to its reported earnings, because the first quarter is their smallest revenue quarter, especially given the current work stoppage in the National Hockey League.

On a constant dollar basis, first quarter sales increased approximately 9% over the prior year's first quarter sales. For the Reebok Brand, worldwide sales in the 2005 first quarter increased 12% to $783 million compared to 2004's first quarter sales of $697 million.

In the U.S., sales for the Reebok Brand increased 8% in the first quarter as compared with 2004's first quarter. Reebok's U.S. footwear sales in the first quarter were $273 million, an increase of 5% when compared with 2004's first quarter U.S. footwear sales of $261 million. This marks the eleventh consecutive quarter of sales growth for the Company's U.S. footwear business. The Company's international sales of Reebok branded products amounted to $397 million in the quarter, an increase of 17% over 2004's first quarter sales. On a constant dollar basis, first quarter international sales increased approximately 13% over the prior year's first quarter sales.

Internationally, sales of footwear products increased 22% and sales of apparel products increased 11%. On a constant dollar basis international footwear sales increased 17%, and international apparel sales increased 7%. Substantially all of the international apparel sales increase is due to the inclusion of The Hockey Company sales in the 2005 first quarter.

Sales for the Company's other brands; Rockport, The Greg Norman Collection and Ralph Lauren Footwear were $142 million in the first quarter of 2005 compared with 2004's first quarter sales of $135 million, an increase of 5%.

The Company reported that its total worldwide backlog of open customer orders (including those of The Hockey Company) scheduled for delivery from April 2005 through September 2005 for the Reebok Brand increased 4% from the prior year's comparable amount. On a constant dollar basis, worldwide backlog for the Reebok Brand increased 2%.

The Company reported that its gross margin for the first quarter of 2005 was 40.3%, an improvement of 10 basis points when compared with the gross margin of 40.2% in the first quarter of 2004. Accounts receivable at March 31, 2005 were $708 million compared to $564 million a year ago. Worldwide inventories at March 31, 2005 totaled $470 million compared to $409 million a year ago. “The increase in accounts receivable and inventory is primarily related to our acquisition of The Hockey Company and to the effects of currency,” said Reebok chairman and CEO Paul Fireman. “Excluding the impact of The Hockey Company and currency, our inventory decreased approximately $14 million or about 3% and our accounts receivable increased about $83 million or about 15%. As we noted at year end, much of our sales growth is coming from regions where the days sales outstanding in receivables (“DSOs”) are longer than the Company average and, as a result, our DSOs have increased from the prior year's first quarter,” Fireman said.

“In summary, I believe we are investing appropriately in all our brands with programs designed to improve our operating performance. With respect to 2005 guidance, we are currently trending on our sales and earnings per share growth targets that we laid out for you last year-end. For the year, our goal is to increase our overall sales somewhere in the mid single digit range and to grow our earnings per share in the range of 15% from our 2004 earnings per share of $2.98, which excludes the effect of unusual items in 2004,” Fireman concluded. 

Reebok International Ltd
THREE MONTHS ENDED MARCH 31,
(Amounts in millions except per share data)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        2005      2004
-----------------------------------------------  ---------------------

Net sales                                            $925.0    $831.9
Cost of sales                                         552.1     497.8
                                                 ---------------------
Gross Margin                                          372.9     334.1
    % of Net sales                                     40.3%     40.2%
Selling, general and administrative expenses          303.9     266.1
    % of Net sales                                     32.9%     32.0%
Interest expense, net                                   2.7       3.5
Other expenses, net                                     1.1       1.9
                                                 ---------------------
Income before income taxes and minority interest       65.2      62.6
    % of Net sales                                      7.0%      7.5%
Income taxes                                           19.6      19.1
                                                 ---------------------
Income before minority interest                        45.6      43.5
Minority interest                                       2.4       2.4
                                                 ---------------------
Net income                                            $43.2     $41.1
                                                 =====================

Basic earnings per share                              $0.73     $0.69
Diluted earnings per share (1)                        $0.70     $0.63